Good morning, ayman. A lot of tense issues. Including the fact this is a president who has been willing to tweet very critical, including nordstroms and the decide to put from that outlet. Thats been a controversy. The retailers here didnt want to talk about that this morning, and you heard the reporters there at the end try to get an answer from the president on this issue of russian espionage contacts by his campaign which was reported in New York Times this morning. The president clearly didnt want to talk about that. He wanted to focus on the jobs report, the stock market. As well as what hes cattle the job crazy efforts. All those to beics here front of mind for this president. Well come back to you in the nottoodistant future. Anchts we are waiting for the retail cos to make that you are way over to the capitol hill after they wrap up the meeting. Here is a full list of were expecting, from the heads of autozone, tractor supply, joann fabrication, gap, j. C. Penney, with several lawmakers, including kevin brady, the powerful chairman of the house ways and means committee, one of the biggest supporters of border adjustments. They are worried that price foss consumers could rise if the tax is implemented. And retailers say their margins are already so thin they would be force to do raise prizes or cut costs. Japan raised its sales tax. And retailer says its a hidden sales take. Thanks, ylan. For more on all of this lets talk to joseph la voigna. Its good to see both of you. Calling this hugely regressive. Do you agree . No. The way you get the economy moving is to lower taxes. The border adjustment raises money and would allow you to cut Corporate Taxes toward where speaker ryan wants them. Economically to me it makes sentence. Do you agree . Im trying to consumers see prices go up for the price they buy, and theyre told Corporate Taxes got cut, arent you happy . I think it is a challenge. I understand why there is concern. Its anythinging the costs of imports, if theres a scenario where they have tight margins, they will likely want to pass on that. You will see some inflationary there had be enough of an offset and that helps the retailersing, but i think it is a risk taker. You also had a pretty hot cpi inflation number as well. So what would they tax measure do . What kind of an economy would it be applied to now when you have Consumer Spending and maybe inflation on the upswing. I would argue its but under a border tax, you would get in principal a oneoff as prices readjusted after the tax is factors in, but there would be an offset. Economists will say its almost one for one. S i would art that they havent been particularly robust. Then certainly i see that really more as a late 17, 18 story. Im going to treat it today more as a withinoff. The head does that winds would beat things like trait, make a more hawkish fed. Is that dynamic still in place . I think it is very much still in place. At this point theres still a lot of question marks out there. We heard there would be a tax reform plan that will help support business investment, that would provide a pretty nice headwind, so i think you have this is scenarios where things could go quite frankly, but at the other end you could have weakness given policies. Joe, all this talk about jobs, the president has ceos in the on the floor office bringing in jobs. Its unclear houf of that will be additive what do the republicans have to do to give consumers something that shows, okay, you are getting a benefits out of the these changes . I would say really, it has to come through stronger wage growth, so thats why ive been a proponent or written about this, you need to cut tax rates. Youre going to cut tax rates across the board, and give households a quick aftertax boost. Thats true, but sentiment is very important, and thats the one thing i would art we havent had in a while are the animal spirits of the corporate structure. If you cut taxes, giving households a tax increase, youre incentivizing businesses with the right plans to maybe invest, maybe more onshore, increase product activity longer term and go ahead meanance wages higher. I think thats the ultimate goal. Joe, how much room is there to cut tax rarity to people who live paycheck to paycheck. Thats not where the tax burt lies, but you want to live that aftertax income and grow the economy, michael, not at a 2 rate, but maybe 3 , 4 , run the economy hot, as yellen has even talked about. Despite her comments in the last day or two, that waiting endangers that whole scenario . Waiting too long . Yeah, the fed always said that, they have hiked rates twice in the last seven years. So i would take what he says with a bit after grain of salt. That does lead us to what shes say on the house side today. Steve liesman is watching that dynamic in front of Financial Services today. A rather entertaining one, were see a microco. Of the debate in america. Is dodd Frank Holding back the economy . The democrats arguing no, the republicans arguing yet. Is the economy really awful . The republicans say yoke, in a very inspired people by representative meeks who reminded the republicans of the economy that president obama inherited, and then of course some other questioning its not really questioning, but much more speechmaking, but one interesting line of questioning, which does raise a couple questions from Patrick Mchenry from north carolina, asking yellen, should there be oversight by congress of some of the interis National Agreements that the fed enters into over at basel, and then a bit of it discussion about the balance sheet, and heres what she said earlier. To shrinking or balance sheet, but consider it best from the standpoint of sustaining the pa recovery to do that in a gradual and orderly way and i am not the federal committee in the coming meetings will be discussing reinvestment policy in greater detail. Guys, what you just missed there is republican testify capuano from massachusetts sort of asking her does she have any banking stocks . Are there any flects at the fed in contrasting that with the president . I dont know how to put this, but maybe having a bit of fun there at the hearing this morning, carl. Thank you very much, steve, and Joseph Lavorgna and michelle are still with us. Just what yellen has had to say about sort of defending the state of the economy and how though translates into her plans for the remainder are the year . Shes been pretty balanced. The economy is progressing, were klee to full employment, starting toss and the policy prescription there is to hike interest rates. However, she continues to note that theres a good reason behind keeping that hiking cycle gradual and shallow. I think another theme out of todays testimony is obviously regulation, but another one of rules versus discretionbased policy. And thats becoming a hot topic, the able to argue that needs to be judgment, not just a rulesbased approach. Joe, are the Vice President perhaps overstating that dodd frank has been so bad . From what yellen has saying, things are not that bad, just not great. Do you i get the sense that they are trying to make the case for big action, but i wonder if theres some down side to that in that there may be not representing the reality of the mediocre soso economy weve got. Obviously people say i have my own ax to grind, but i think dodd will frank was a disaster. The pendulum swung way too far the other way, and definitely hurt lending and so what fed chair yellen says to that, you say . I saw fed chair yellen talk about bond liquidity is good . I would disagree with that. I know peopler in the market and they say the opposite. On the economy site, theyve been making the case for stagnation. Thats hardly a strong economy. Im an optimist and like to believe we can do better than 2 gdp growth. Im saying i think we can do at least 3. If we should do 3 growth for a period of time with the right policies, and thats why i got much more bullish since the election. At least i see an emphasis on getting the economy moving. The issue will be for how long it can sustain 3 growth. And the political turmoil make you less certain this week . No, there is a lot of noise, certainly some growing pains. We need to see state of the union, have more faith that stuff is going to get done properly. No, it doesnt change it. The drama were seeing, not this one. We might like to ignore if, but its influential in dictating economic growth. We have to Pay Attention to it. Mea view is that 3 is a challenge. I think it will be hard torts 3 growth this year weve dealt with low product activity growth. There is potential for cyclical improvement, but that could bring you to a mid2 pace. I think its hard to generate that above3 , growth at this point in the cycle where we do have structural challenges. Policy matters, of course. The Regulatory Environment changes, perhaps you can see the acceleration, but i think its a high hurdle. Yeah, burden of proof pretty high. Joe, thanks for being here. When we come back, well talk to Michael Gould on this mornings retail negotiation with the president. Big bets on apple after hitting alltime high. Why Warren Buffett things the stock could go higher. Dow is working on the longest win streak of the year. S p up seven would be the longest streak in more than three years. Were back in a minute. Dows almost up 100 points here, at 20k is about 600 points ago. Retailers including ceos meeting at the white house right now. This is tape from a few moments ago. Executives expected to be making their case again a proposed border tax, president promising a massive tax plan which will le released very soon. Heres the president a few moments ago. Theres a lot of confidence in our economy right now, a great confidence level. Youve been seeing that in the stock market, seeing that in businesses, and youve been seeing that in every chart. Evidence also by the jobs report that just came out for january, 227,000 jobs added. My Administration Remains very focused on the issues that will encourage economic growth. Thats what were all about. Joining us this morning with zone inside, mike gould joining us. Mike, good to see you again. Thanks. Good morning. What would you be saying this morning if you were at that table . Well, i think i would be saying a number of things. One, the Retail Business in Department Stores and discounters other than t. J. Max, burlington, stores like that, i think is different. I this februarys start was different. I think everyones margins are going to be depressed when they come out with the yearend earnings. I think the business is difficult. That being said, heres disney a week or so ago saying the parks were up 6 , the average units spent and the customers up, but i think its difficult in the stores right now in what i would call the Department Stores and discount stores. The president said i want you to tell me why youre going to add more stores, grow and be job creators. This happens at an interesting time, which is are will shrink mode and a pretty tough spot, you think thats going to make them more persuasive in arguing against this tax shock. Well, i think theres a number of things. I think that takes it to a whole new levels to think that stores are going to add stores. Sears and kmart are reducing stores. The number of stores that have gone out of the business with chapter 11. Whatever the right number is, 24 square feet per capita in the United States, 11 per capita in canada for retail, less than Single Digits in the uk and germany, were totally overstored here. The stores are not profitable right now. Thats a major problem, and thats compounded by the for a cant that the Online Business is growing, and i think its not as profitable, in many casesi not profitable at all and hurting the core business. I mean, just today i thought i saw a report that Warren Buffett has closed out his holdings of walmart and feeling that retail has been changed forever. I do believe and ive said this many times that people have been going to the market since the time of the greeks the i think people will continue to go to the stores. It has to have an experience. Its a social experience. It isnt just to buy more stuff. On your comment on the border tax, as i understand it, because if you have to raise your prices, you are going to sell less merchandise. There are enough studies on that from think tanks from all the people who have studied that, to Malcolm Gladwell who did that on the price of eggs, for cryin out loud. Its [ laughter ] seriously its foolhardy to this i youre going to raise prices and not hurt business. Economics 101 suggests there will be impact there. A Corporate Tax cut helps more if you have profits. Increasingly it seems this economy that weve got is a service economy. A lot of the jobs are in the Services Area in retail where maybe they wont benefit as much from a court tax cut, but might be affected by this border adjustment tax. What kind of policy would you think would have the most positive impact on retail right now . 1 of their profits, may 80 of their profits would disappear because of a border tax. The pressure on margins is enormous, as promassality has continued on, even though people say its a drug and we have to get out of it, we keep on doing it, or the industry keeps on doing it for the most part that hurts of margin, the bigger the Online Business gets in the Department Stores and the special stores, that hurts the margin, so the margins will be hurt all right. Now youll have an increase in pricing which will reduce the amount of big you do. Then theyre going to take support people out of the store, so youre going to have less employment as the stores become less and less viability. It only takes a few percent. Im not an commission, i dont know the right thing im sorry . Your point is well made about staffing the stores. I think the president and his team wee argue, though it brings some textile business back to the country. If you were ralph lauren, or urban or a f, do we have the infrastructure to start making our own clothes again . How do you change those away from turkey and sri lanka . I think you have to ask the ceo of a big aapparel company if they would say that publicly. We dont have the infrastructure to do it to that degree at the price points were doing now. To think well be able to do that is foolhardy. I think those jobs have disappeared. One of the books ive read lately is thank you for being late. Its required for anyone thinking about moving this country forward. I mean, these jobs have disappeared from this country. Its how do we develop other kinds of jobs . Give people lifelong education in the companies were already in, but i think the jobs coming back competing with prices, that ship has long sailed. Mike, one last thing on the puzzle that nordstrom finds itself in, being called out by the president , what is i mean, you talk to your friends, what is the solution out of that trap . Well, listen, the solution is i mean, nordstroms did what they did. It would baffle me that they didnt do that strictly on sales. When business, as tough as it is right now, can you look at every dollar that you can do. You want it in the store with stock. That brand had stopped selling, or seral not selling to the degree it had been that warranted staying on the shelves. How it got blown up to this degree, im not going to get into that conversation, but theres no way in my mind i have spoken to a couple friends in other stores who ask my opinion. My comment is if its selling, you leave it on the shelves. If its not selling, you dispin it. I think they did it based on economic reasons. Thats my gut feeling. It would have been done on economic reasons. Mike, good to get your inside today. It was on a day when everyone is trying to figure out retail from all sorts of angles. Thanks again. My pleasure. And still to come, we are continuing to monitor janet yellen on the hill. Well have the latest. As we track retails big day in washington, congressman kevin brady. Hell be meeting with the retailers today. Chairman of the powerful taxwriting ways and mean committee. Thats coming up. Well be right back. Rade you alize e smartest itide isnt t ve t yoinst with. You alize e smartest itide whe tonlthe werebvus wheyou e. Ertoet out. Th. Smtetry d exoilp y fin lityerrwills. Lityerrwills. Yonyobe go ,nit fls tsee dee youreseffos. Buwhat if yocould rnityerrwills. Yonyobe round . T fwhyocould yo deover oncedail s the 1 pres bsglt2 inhibitor ornityerrwills. Lor yonyobe round . T fwhyocould yo to snificanter blo g ieinindus winginka iused dias. Fact, is enron to be moreffecte lering a1c thanuvia. Invokan duci the amoar anils notorowergs ofending souo urat lering a1c thanuvia. Invokan us directly and,000 who provide is services. 42 million jobs . America. We look forward to carly on the conversation with the president and his team as we continue to look to move the interests of our industry, our employees, and most importantly the consumers, the hardworking American Consumers that we all serve. We thank you very much. Have a great day. William rhodes speaking on behalf of the other ceos. Interesting conundrum they find themselves in. Without a doubt. Obviously they like the idea of a lower Corporate Tax rate. Thats one thing theyre most by domestic businesses, all kind of have high tax rates the this thing, the border adjustment tax is so disruptive potentially. Does it strike you theyre making such a hardcourt press, when most on the sell side dont expect it to be part of the package in the first place. I guess it almost seems like such an existential threat you have to be sure. A lot of people believe why do you have to go to the white house . There is that core in the house that feels its integral to moving forward. Could be good chess. If theres no way its going to happen, but President Trump has these retail ceos into the white house to tell them please make sure it sdrnlt happen, and then it doesnt happen . Or better yet, the president says the ceos have spoken, i think it costs too much, get it done somehow. Exactly. The ceos said something to me and look what ha